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Merger of Two Japanese Banks Creates 2nd Largest Bank in World

August 29, 1989

TOKYO (AP) _ Mitsui Bank and Taiyo Kobe Bank have agreed to merge next April, creating the second largest bank in the world, bank officials said today.

Analysts said the bank merger was the biggest in recent memory.

″In terms of sheer scale there’s nothing like it,″ said Simon Smithson, analyst at Kleinwort Benson Securities. ″It dwarfs anything that exists.″

The new bank will be second in total assets only to Dai-Ichi Kangyo Bank, ranked the largest in the world in assets. Currently, Sumitomo Bank is the second largest bank in Japan.

Mitsui Bank, the country’s seventh largest bank, and Taiyo Kobe, the eighth largest, will merge into a new bank to be called Taiyo Kobe Mitsui Bank as of April 1, Kenichi Suematsu, president of Mitsui Bank, said at a news conference.

″Facing today’s globalization and liberalization of the financial world ... a bank must have a certain degree of size or quality can’t follow,″ said Suematsu, who will become the president of the new bank.

″We have judged forming a new bank by a merger will lead to providing the best financial and information services to our customers,″ said Yasuo Matsushita, president of Taiyo Kobe Bank, who will become chairman of the new bank.

Suematsu and Matsushita, who described themselves as close friends for over 20 years, said they hope the merger will strengthen their banks’ domestic and international networks.

The Finance Ministry and banking circles generally favored the merger.

″I welcome the decision by both banks to merge, given the liberalization and internationalization of the financial market,″ said Finance Minister Ryutaro Hashimoto. ″I think it is timely to bolster the operation by utilizing increased profits to provide a diversity of services to customers in and out of the country.″

Kuniji Miyazaki, president of the Federation of Bankers’ Associations of Japan and also of Japan’s largest bank, Daiichi-Kangyo Bank, hailed what he called a ″courageous decision″ by the banks’ managements, Kyodo News Service reported.

Mitsui Bank, one of the oldest banks in Japan, founded in 1876, had $147 billion in funds at the end of March, 9,760 employees and 242 branches worldwide, while Taiyo Kobe had funds of $128 billion, 12,931 employees and 374 branches, according to both banks.

It will be the second major merger for Taiyo Kobe Bank, which was formed by a merger between Taiyo Bank and Kobe Bank in 1973.

While Matsushita and Suematsu said the deal was ″straight up,″ the two companies will exchange eight Mitsui shares for every 10 Taiyo Kobe shares. They said the name of the new bank will be reviewed and changed in three years, because it is ″too long,″ said Suematsu.

The bank’s name in English, ″Mitsui Taiyo Kobe Bank,″ reverses the name in the Japanese version, ″Taiyo Kobe Mitsui Ginko (bank),″ company officials said.

Analysts said that the merger would join Taiyo Kobe’s extensive domestic network with Mitsui’s international expertise, and create economies of scale that are the basis of Japanese banks’ international competitiveness.

In terms of assets, Japanese banks dominate the 10 largest banks in the world, according to American Banker, a New York-based daily newspaper.

″This may ignite a series of similar mergers in Japan,″ said Thomas Zengage, senior analyst at International Business Institute, a consulting firm in Tokyo.

″Amid the deregulation and intensifying competition, Japanese banks’ perception about a merger is changing,″ said Zengage, adding that mergers in Japan’s banking industry often had been considered undesirable unless one company was near bankruptcy and needed a partner’s help.

Japanese banks are generally considered less sophisticated in many aspects of international business than their American or European competitors despite their overwhelming size, but can rely on huge deposits at home to create volume discounts.

The Tokyo Stock Exchange suspended trading of Mitsui and Taiyo Kobe Banks shares today for the day.

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